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The Expert View: G4S, William Hill and SuperGroup

A roundup of some of the best analyst commentary on shares, including PZ Cussons and RBS.

Our daily round-up of analyst recommendations and commentary, featuring G4S, William Hill, SuperGroup, PZ Cussons and RBS.

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Key stats
Market capitalisation£3,888m
No. of shares out1,404m
No. of shares floating1,389m
No. of common shareholdersnot stated
No. of employees657000
Trading volume (10 day avg.)3m
Turnover£7,502m
Profit before tax£207m
Earnings per share14.73p
Cashflow per share33.17p
Cash per share35.82p

*Correct as at 29 Jan 2013

G4S looks set to brush off Olympics fiasco

The Olympics security staffing fiasco hasn't put the Ministry of Justice off using G4S (G4S.L), the firm that bungled the job. That was the message JP Morgan analyst Andrea O'Keeffe took away from a seminar yesterday, prompting her to reiterate her 'overweight' recommendation on the shares.

The seminar featured two Ministry of Justice officials: Vincent Godfrey (director of procurement) and Ian Poree (director of rehabilitation). According to O'Keeffe: 'Godfrey said that as far as the MoJ is concerned G4S’s performance is where it should be and recent bids in the field of prisons and electronic tagging have not been impacted by the Olympics.'

The firm expects to reach a settlement with the government over the Olympics contract in the next few weeks.

'Godfrey said that despite lots of newspaper headlines the MoJ was pursuing a large range of outsourcing opportunities which would involve the private sector,' the analyst added.

Shares in the group closed at 279.9p on Tuesday, up 1p or 0.4%.

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Key stats
Market capitalisation£2,644m
No. of shares out706m
No. of shares floating702m
No. of common shareholdersnot stated
No. of employees16900
Trading volume (10 day avg.)3m
Turnover£1,137m
Profit before tax£115m
Earnings per share16.28p
Cashflow per share26.56p
Cash per share16.28p

*Correct as at 29 Jan 2013

William Hill shares set to rise on 'exceptional' results

Betting shop William Hill (WMH.L) has posted a strong set of annual figures, and Shore Capital analyst Greg Johnson says a rerating of the shares now looks likely.

Johnson, who has a 'buy' stance on the shares, said the results were 'exceptionally strong', with full-year operating profit expected to be some £25 million ahead of his forecast at about £330 million and up 20% on last year.

'The exceptionally strong performance was driven by a very strong win margin in the period, resilient trading in the retail estate and a continued very strong performance in online,' the analyst said. Full-year online profits increased by 36% to £145 million, well ahead of Johnson's £128 million forecast.

The group is on track to complete the Sportingbet acquisition by the end of the quarter, with an announcement on the Playtech minority due at a similar date. 'We believe that with a fair wind and a completion of the two proposed underlying pro-forma earnings could reach 31p which implies an underlying rating of under 12x. With the business transforming to an online dominated group we believe a further re-rating is likely,' the analyst concluded.

Shares in the group closed at 376.3p on Tuesday, up 9.9p or 2.7%.

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Key stats
Market capitalisation£458m
No. of shares out80m
No. of shares floating27m
No. of common shareholdersnot stated
No. of employees1774
Trading volume (10 day avg.)0m
Turnover£314m
Profit before tax£36m
Earnings per share44.68p
Cashflow per share61.02p
Cash per share38.51p

*Correct as at 29 Jan 2013

SuperGroup shares a 'buy', Seymour Pierce says

Seymour Pierce analyst Freddie George has reiterated his 'buy' recommendation on fashion retailer SuperGroup (SPG.L) ahead of next week's third-quarter update.

George is expecting retail sales to increase by 17.5%, with like-for-like sales up by 1%, which is down from the first-half level of +26.7%.

'This is mainly due to a slowdown in store openings, seven (circa 9% increase in space) in the last 12 months compared with 19 in 2012 (40% increase in space),' he said. 'In Wholesale, where there is greater visibility on the outlook, we forecast sales growth of 5%, similar to the first-half trend but expect a significant pick up in the fourth quarter in view of the strong order book.'

George is sticking with his 2013 pre-tax profit forecast of £52 million, and he said the shares look cheap. 'In view of the business opportunities, greater confidence in the existing management structure and strength of balance sheet – the company could have net cash of over £50m by April 2013 - we believe the stock is undervalued.'

Seymour Pierce is a market maker for SuperGroup, and Freddie George owns shares in the company.

Shares in the group closed at 581.2p on Tuesday, down 10.8p or 1.8%.

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Key stats
Market capitalisation£1,605m
No. of shares out429m
No. of shares floating229m
No. of common shareholdersnot stated
No. of employees7336
Trading volume (10 day avg.)0m
Turnover£859m
Profit before tax£34m
Earnings per share7.99p
Cashflow per share14.05p
Cash per share17.00p

*Correct as at 29 Jan 2013

PZ Cussons still too expensive, Canaccord says

Shares in personal healthcare business PZ Cussons (PZC.L) are still too expensive even though the latest results have surpassed expectations, according to Canaccord analyst Alicia Forry.

Between June and November Underlying operating profit rose 13%, beating guidance for 10% growth, while revenues were flat (+2.7% in constant currency), hurt by trading conditions in its largest market, Nigeria, and fall in the Indonesian rupiah. The interim dividend was lifted 5% on top of last year's 5% increase.

However, Forry's still bearish on the shares. 'We have a Sell recommendation on PZ Cussons based on the stock’s expensive valuation and the near term headwinds in Nigeria (from terrorism, reduced consumer spending power and floods), the UK (weak consumer and highly promotional retail environment), Greece (austerity) and Australia (cautious consumer).

'We applaud management’s commitment to rightsizing the cost base where possible, but we prefer to see improving consumer trends in PZ Cussons’ main markets before turning more constructive on the stock.'

Shares in the group closed at 375.6p on Tuesday, down 18.8p or 4.8%.

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Key stats
Market capitalisation£39,064m
No. of shares out11,336m
No. of shares floating7,139m
No. of common shareholdersnot stated
No. of employees142800
Trading volume (10 day avg.)10m
Turnover£21,410m
Profit before tax£-2,044m
Earnings per share-18.89p
Cashflow per share- 1.30p
Cash per share719.13p

*Correct as at 29 Jan 2013

Don't expect growth at RBS, Investec warns

Investec analyst Ian Gordon has reiterated his 'sell' recommendation on Royal Bank of Scotland (RBS.L), saying apparent growth in lending is illusory.

Gordon's not too worried about the impact of a renewed regulatory drive, saying the bank is 'awash with liquidity' in the wake of the government's Funding for Lending scheme. However, he believes the market's expectation of growth is misplaced.

'We continue to believe that the market is getting ahead of itself in terms of anticipating any material uptick in, (or resumption of), net lending. As such, revenues, returns and, by extension, valuation may yet disappoint the bulls,' he said.

'Lending to UK Corporates (both large and small) remains solidly negative... It is not simply a matter of high repayments – gross lending (for RBS and the wider industry) has been in steady decline. Recent Bank of England data (November 2012: Net lending £2.8 billionn negative) was truly awful.'

Shares in the group closed at 344.9p on Tuesday, down 22.9p or 6.2%.

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